Slate Retail REIT CONSOLIDATED FINANCIAL STATEMENTS · Slate Retail REIT (the "REIT") is an unincorporated, open-ended mutual fund trust under and governed by the laws of the Province

Slate Retail REIT

CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2019 and 2018

Independent Auditor's Report

To the Unitholders and the Board of Trustees of Slate Retail REIT

Opinion

We have audited the consolidated financial statements of Slate Retail REIT (the “REIT”), which comprise the consolidated statements offinancial position as at December 31, 2019 and 2018, and the consolidated statements of income, comprehensive income (loss), changes inunitholders’ equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary ofsignificant accounting policies (collectively referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the REIT as at December31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance with International Financial ReportingStandards (“IFRS”).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our responsibilities underthose standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We areindependent of the REIT in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, andwe have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtainedis sufficient and appropriate to provide a basis for our opinion.

Other Information

Management is responsible for the other information. The other information comprises Management’s Discussion and Analysis.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so,consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, orotherwise appears to be materially misstated.

We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed onthis other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in thisauditor’s report. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internalcontrol as management determines is necessary to enable the preparation of financial statements that are free from material misstatement,whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the REIT’s ability to continue as a going concern, disclosing,as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidatethe REIT or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the REIT’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expectedto influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughoutthe audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and performaudit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involvecollusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the REIT’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures madeby management.

Slate Retail REIT Q4 2019 Financial Statements 65

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidenceobtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the REIT’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s reportto the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions arebased on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the REITto cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financialstatements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit andsignificant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regardingindependence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor’s report is Francesco (Frank) Quatrale.

Chartered Professional AccountantsLicensed Public AccountantsToronto, OntarioFebruary 25, 2020


Note December 31, 2019 December 31, 2018

ASSETS

Non-current assets

Properties 4, 5 $ 1,288,536 $ 1,382,955

Equity investment 6 5,049 —

Interest rate swaps 7 1,761 2,818

Other assets 8 2,293 2,511

$ 1,297,639 $ 1,388,284

Current assets

Other assets 8 786 12,222

Prepaids 2,518 2,733

Accounts receivable 9 11,725 11,985

Cash 2,412 1,110

$ 17,441 $ 28,050

Total assets $ 1,315,080 $ 1,416,334

LIABILITIES AND UNITHOLDERS' EQUITY

Non-current liabilities

Debt 10 $ 708,940 $ 868,517

Interest rate swaps 7 21,582 —

Other liabilities 2,780 2,945

Exchangeable units of subsidiaries 11 10,926 19,045

Deferred income taxes 12 62,259 57,481

$ 806,487 $ 947,988

Current liabilities

Debt 10 80,455 3,045

Accounts payable and accrued liabilities 13 21,397 22,948

Distributions payable 18 3,029 3,157

Taxes payable 285 1,393

$ 105,166 $ 30,543

Unitholders' equity $ 403,427 $ 437,803

Total liabilities and unitholders' equity $ 1,315,080 $ 1,416,334

Slate Retail REITCONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in thousands of United States dollars, unless otherwise stated)


Year ended December 31,Note 2019 2018

Rental revenue 14 $ 141,315 $ 144,213

Property operating expenses (41,031) (40,509)

Other expenses 15 (10,717) (10,306)

Interest expense and other financing costs, net 16 (36,843) (35,424)

Share of income in equity investment 6 151 —

Disposition costs 4, 17 (6,698) (2,201)

Change in fair value of financial instruments 7 (4,374) —

Change in fair value of properties 5 (1,446) (66,686)

Net income (loss) before income taxes and unit (expense) income $ 40,357 $ (10,913)

Deferred income tax (expense) recovery 12 (9,565) 4,021

Unit (expense) income 11, 18 (4,469) 9,353

Net income $ 26,323 $ 2,461

Slate Retail REITCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(in thousands of United States dollars, unless otherwise stated)


Net income $ 26,323 $ 2,461

Items to be subsequently reclassified to profit or loss:

Loss on cash flow hedges of interest rate risk, net of tax 7 (12,157) (4,227)

Reclassification of cash flow hedges of interest rate risk to income 7 (1,321) (1,527)

Other comprehensive loss (13,478) (5,754)

Comprehensive income (loss) $ 12,845 $ (3,293)

Slate Retail REITCONSOLIDATED STATEMENTS OF INCOME (in thousands of United States dollars, unless otherwise stated)


Note REIT unitsRetained earnings

Accumulated othercomprehensive

income ("AOCI")Capitalreserve Total

Balance, December 31, 2018 $ 419,008 $ 18,141 $ 2,078 $ (1,424) $ 437,803

Net income and comprehensive income — 26,323 (13,478) — 12,845

Distributions 11, 18 — (35,764) — — (35,764)

Repurchases 11 (22,296) — — — (22,296)

Exchanges 11 10,839 — — — 10,839

Balance, December 31, 2019 $ 407,551 $ 8,700 $ (11,400) $ (1,424) $ 403,427

Note REIT unitsRetained earnings AOCI

Capitalreserve Total

Balance, December 31, 2017 $ — $ 41,337 $ 7,832 $ (1,424) $ 47,745

Net income and comprehensive loss — 2,461 (5,754) — (3,293)

REIT units 1 11 435,285 — — — 435,285

Distributions 11, 18 — (25,657) — — (25,657)

Repurchases 11 (16,487) — — — (16,487)

Exchanges 11 210 — — — 210

Balance, December 31, 2018 $ 419,008 $ 18,141 $ 2,078 $ (1,424) $ 437,8031 Effective May 11, 2018, the class A, class I and class U units of the REIT have been presented within unitholders' equity. Refer to note 11 REIT units and exchangeable units ofsubsidiaries for further detail.

Slate Retail REITCONSOLIDATED STATEMENTS OF CHANGES IN UNITHOLDERS' EQUITY(in thousands of United States dollars, unless otherwise stated)



Operating Activities

Net income $ 26,323 $ 2,461

Items not affecting cash:

Straight-line rent 5 (1,640) (2,572)

Change in fair value of financial instruments 7 4,374 —

Change in fair value of properties 5 1,446 66,686

IFRIC 21 property tax adjustment 5 — (200)

Deferred income tax expense (recovery) 12 9,565 (4,021)

Unit expense (income) 18 4,469 (9,353)

Share of income in equity investment 6 (151) —

Interest expense and other financing costs 16 36,843 35,424

Cash interest paid, net (35,376) (34,738)

Changes in working capital items (1,375) 4,136

$ 44,478 $ 57,823

Investing Activities

Acquisitions 4 — (12,594)

Dispositions 4 110,145 54,814

Contributions to equity investment 4, 6 (3,281) —

Proceeds from equity investment 4 10,027 —

Funds held in escrow (295) (26)

Capital 5 (2,514) (5,555)

Leasing costs 5 (1,562) (2,871)

Tenant improvements 5 (5,290) (8,125)

Development and expansion capital 5 (6,686) (9,864)

$ 100,544 $ 15,779

Financing Activities

Revolver advances 10, 24 81,516 38,100

Revolver and mortgage repayments 10, 24 (165,381) (59,319)

Repurchases of REIT units 11 (22,296) (21,234)

REIT units distributions, net of DRIP units issued 18 (35,910) (35,547)

Exchangeable units of subsidiaries distributions 18 (1,649) (1,875)

$ (143,720) $ (79,875)

Increase (decrease) in cash 1,302 (6,273)

Cash, beginning of the period 1,110 7,383

Cash, end of the period $ 2,412 $ 1,110

Slate Retail REITCONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of United States dollars, unless otherwise stated)


1. DESCRIPTION OF THE REIT AND OPERATIONS

Slate Retail REIT (the "REIT") is an unincorporated, open-ended mutual fund trust under and governed by the laws of the Province of Ontario.The REIT focuses on acquiring, owning and leasing a portfolio of diversified revenue-producing commercial real estate properties (the"properties") in the United States of America (the "U.S.") with a focus on grocery-anchored retail properties.

The class U units of the REIT trade on the Toronto Stock Exchange ("TSX") under the symbols SRT.U and SRT.UN. The principal, registered,and head office of the REIT is 121 King Street West, Suite 200, Toronto, Ontario, M5H 3T9.

The objectives of the REIT are to:

i. provide unitholders with stable cash distributions from a portfolio of diversified revenue-producing commercial real estate properties inthe U.S. with a focus on grocery-anchored retail properties;

ii. enhance the value of the REIT’s assets in order to maximize long-term unitholder value through active management; and

iii. expand the asset base of the REIT and increase the REIT’s earnings on a per unit basis, including through accretive acquisitions.

Slate Retail REIT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As at and for the years ended December 31, 2019 and 2018

(in thousands of United States dollars, unless otherwise stated)

Slate Retail REITNotes to the Consolidated Financial StatementsAs at and for the years ended December 31, 2019 and 2018(in thousands of United States dollars, unless otherwise stated)


2. BASIS OF PREPARATION

i. Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issuedby the International Accounting Standards Board.

ii. Approval of the consolidated financial statements

The consolidated financial statements were approved by the trustees of the REIT and authorized for issuance on February 25, 2020.

iii. Basis of measurement

These consolidated financial statements have been prepared on a going concern basis and measured at historical cost except for propertiesand certain financial instruments, which are measured at fair value.

The application of the going concern basis of presentation assumes that the REIT will continue in operation for the foreseeable future andbe able to realize its assets and discharge its liabilities and commitments in the normal course of business. The REIT expects to continue asa going concern for the foreseeable future.

iv. Functional and presentation currency

These consolidated financial statements are presented in U.S. dollars, which is the REIT’s functional currency and the functional currency ofall of its subsidiaries.

3. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with the significant accounting policies described below.

i. Basis of consolidation

The consolidated financial statements include the accounts of the REIT and its subsidiaries in accordance with IFRS 10, Consolidated FinancialStatements. Intercompany transactions and balances have been eliminated on consolidation.

A subsidiary is an entity over which the REIT has control. Control exists when the REIT has power over an investee, is exposed, or has rights,to variable returns from its involvement with the investee; and has the ability to use its power over the investee to affect its returns. Thefinancial statements of a subsidiary are included in the consolidated financial statements from the date that control commences until thedate that control ceases. The accounting policies of a subsidiary are changed when necessary to align them with the policies applied by theREIT in these consolidated financial statements.

ii. Properties

Properties include land and buildings held primarily to earn rental income, for capital appreciation or for both. The REIT accounts for theproperties in accordance with IAS 40, Investment Property (“IAS 40”). For acquired properties that meet the definition of a business, theacquisition is accounted for as a business combination. Acquisitions of properties that do not meet the definition of a business are initiallymeasured at cost including directly attributable transaction costs.

Subsequent to acquisition, properties are measured at fair value, which is determined based on available market evidence at the statementof financial position date including, among other things, rental revenue from current leases and reasonable and supportable assumptions that

represent what knowledgeable, willing parties would assume about rental revenue from future leases less future cash outflows in respect ofcapital expenditures. Changes in fair value of properties are recognized in net income in the period in which they arise.

The carrying value of properties includes the impact of straight-line rent receivable, tenant inducements, direct leasing costs and adjustmentsrelated to the impact of IFRIC 21, Levies ("IFRIC 21").

Direct leasing costs include leasing commissions, lease incentives, and legal fees directly attributable to negotiating and arranging a lease.Lease incentives that are spent on improvements are referred to as tenant improvements and are capitalized. All other lease incentives arereferred to as tenant inducements. Lease incentives that do not provide benefits beyond the initial lease term are included in the carryingamount of properties and are amortized on a straight-line basis over the term of a lease as a reduction of revenue.

When a property is disposed of, the gain or loss is determined as the difference between the sales price and the carrying amount of theproperty and is recognized in net income in the period of disposal as a change in the fair value of property. Sales costs are recorded asdisposition costs on the consolidated statement of income.

iii. Business combinations

The REIT accounts for property acquisitions as a business combination if the particular assets and set of activities acquired can be operatedand managed as a business in its current state. The REIT applies the acquisition method to account for business combinations. Theconsideration transferred for a business combination is the fair value of the assets transferred, the liabilities incurred to the former owners ofthe acquiree and the equity interests issued by the REIT. The total consideration includes the fair value of any asset or liability resulting froma contingent consideration arrangement. Identifiable assets acquired as well as liabilities and contingent liabilities assumed in a businesscombination are measured initially at their fair values at the acquisition date. Acquisition related costs are expensed as incurred.

The REIT recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognized amounts of the acquiree’s identifiable net assets.

Any contingent consideration is recognized at fair value at the acquisition date. Subsequent changes to the fair value of contingentconsideration is recognized as a liability in accordance with IFRS 9, Financial Instruments ("IFRS 9") primarily in net income or, in certaincircumstances, as a change to other comprehensive income ("OCI"). Contingent consideration that is classified as equity is not re-measured,and its subsequent settlement is accounted for within equity.

Goodwill is initially measured as the excess of the aggregate of the fair value of consideration transferred and the fair value of non-controllinginterest over the identifiable net assets acquired. If the consideration is lower than the fair value of the net assets acquired, the difference isrecognized in net income as a bargain purchase option.

iv. Funds held in escrow

Funds held in escrow represents restricted cash held in reserve for holdbacks for property taxes as required by mortgages and tenant leases.

v. Leases

Leases where the REIT, as the lessor, does not transfer substantially all the risks and rewards of ownership of its properties are classified asoperating leases. Leases that transfer substantially all the risks and rewards of ownership of an asset are classified as finance leases. TheREIT assesses the classification of leases at the inception date of the lease, being the date when the lease is signed. All of the REIT's leasesare considered operating leases.

vi. Revenue recognition

Revenue from properties includes rents from tenants under lease agreements, percentage rents, property tax and operating cost recoveriesand other incidental income. Lease components, including rents from tenants, percentage rents and property tax recoveries are accountedfor pursuant to IFRS 16, Leases ("IFRS 16") and are therefore outside the scope of IFRS 15, Revenue from Contracts with Customers ("IFRS 15")while non-lease components which includes operating cost recoveries are within the scope of IFRS 15. The REIT recognizes lease incomewhen the tenant has a right to use the leased asset. This occurs on the lease commencement date or, where the REIT is required to makeadditions to the property in the form of tenant improvements that enhance the value of the property, upon substantial completion of thoseimprovements. The total amount of contractual rent to be received from operating leases is recognized on a straight-line basis over the termof the lease. Straight-line rent receivables, which is included in the carrying amount of the property, is the difference between the cumulativelease income recorded and the contractual amounts due. Common area maintenance and other services are recognized in the period thatservices are performed and are chargeable to tenants. The REIT's adoption of the new IFRS 16 standard has not resulted in other policydifferences.

vii. Expenses

Property operating expenses and other expenses are recognized in net income in the period in which they are incurred.





viii. Property tax liability and expense

IFRIC 21 provides guidance on when to recognize a liability for levies that are accounted for in accordance with the requirements of IAS 37,Provisions, Contingent Liabilities and Contingent Assets, and those where the timing and amount of the levy are certain. Levies are outflowsfrom an entity imposed by a government in accordance with legislation. The REIT has assessed property taxes as being within the scope ofIFRIC 21, given that property taxes are non-reciprocal charges imposed by a government, in accordance with legislation, and are based onthe assessed value of property. IFRIC 21 confirms that an entity recognizes a liability for a levy when, and only when, the triggering eventspecified in the legislation occurs. The REIT has determined that the liability to pay property taxes on its properties should be recognized ata point in time, being the start of the fiscal year. This resulted in the REIT recognizing the annual property tax liability and expense on itsproperties annually at January 1.

ix. Other comprehensive income

Comprehensive income (loss) consists of net income and OCI. OCI represents change in the REIT's equity during a period arising fromtransactions and other events with non-owner sources.

x. Income taxes

Subsidiaries of the REIT, Slate Retail Investment L.P. ("Investment L.P.") and GAR (1B) Limited Partnership ("GAR B"), that hold the REIT’sinvestments each made an election pursuant to the U.S. Internal Revenue Code, as amended, to be classified as corporations for U.S. federalincome tax purposes. Consequently, Investment L.P. and GAR B are each considered a "foreign corporation" for U.S. federal income tax purposes.The REIT measures deferred tax liabilities of these subsidiaries by applying the appropriate tax rate to temporary differences between thecarrying amounts of assets and liabilities and their respective tax basis. The appropriate tax rate is determined by reference to the rates thatare expected to apply to the year and the jurisdiction in which the assets are expected to be realized or the liabilities settled. Deferred taxassets are recorded for all deductible temporary differences, carry forwards of unused tax credits and unused tax losses, to the extent thatit is probable that deductions, tax credits and tax losses can be utilized. For the determination of deferred tax assets and liabilities where theproperty is measured using the fair value model, the presumption is that the carrying amount of a property is recovered through sale, asopposed to presuming that the economic benefits of the property will be substantially consumed through use over time. The REIT qualifiesas a "mutual fund trust" under the Income Tax Act (Canada) and plans to distribute or designate all taxable earnings to unitholders and, undercurrent legislation, the obligation to pay tax rests with each unitholder. Accordingly, no current or deferred tax provision is recognized on theREIT’s income at the REIT level in addition to deferred tax amounts recorded in respect of Investment L.P. and GAR B on consolidation.

xi. Slate Retail exchangeable units and GAR B exchangeable units

Class B units of Slate Retail Two L.P. and Slate Retail One L.P. ("Slate Retail exchangeable units"), which are each subsidiaries of the REIT, areredeemable by the unitholder, for cash or class U units of the REIT at the option of the REIT and therefore are classified as financial liabilitiesunder IAS 32, Financial Instruments: Presentation ("IAS 32"). Exchangeable limited partnership units of GAR B ("GAR B exchangeable units")have also been issued from a subsidiary of the REIT and are redeemable for class U units at the option of the holder and therefore, are classifiedas financial liabilities under IAS 32.

Slate Retail exchangeable units and GAR B exchangeable units (collectively, the "exchangeable units of subsidiaries") are designated as fairvalue through profit or loss ("FVTPL") under IFRS 9. Distributions paid on exchangeable units of subsidiaries are recorded as unit expensein the period in which they become payable.

xii. REIT units

The REIT has class A units, class I units and class U units issued and outstanding (collectively, the "REIT units"). As an open-ended investmenttrust, unitholders of each class of units of the REIT are able to require the REIT to redeem at any time or from time to time at the demandof the unitholder all or any part of the REIT units held by the unitholder in an amount equal to redemption price, as specified by the REIT’sDeclaration of Trust. This redemption is to be provided in cash, subject to certain limitations. If a redemption is not satisfied in cash, theredemption price is to be paid by notes of the REIT or property of the REIT.

Effective May 11, 2018, the REIT units have been classified as equity, as each unit class has identical features, and measured at cost anddistributions to unitholders are recorded as equity and recognized when declared by the Board of Trustees. REIT units are presented as aseparate component in the Consolidated Statements of Changes in Unitholder's Equity. Equity offering costs are deducted against the costof units issued. Prior to May 11, 2018, units of the REIT were presented as a liability in its consolidated financial statements.





xiii. Financial instruments

Financial instruments are classified as amortized cost, fair value through profit or loss, or fair value through OCI. The REIT has made thefollowing classifications:

Classification

Financial assets

Cash Amortized cost

Interest rate swaps 1 FVTPL

Accounts receivable Amortized cost

Tax incremental Financing ("TIF") notes receivable Amortized cost

Financial assets within other assets 2 Amortized cost

Notes receivable Amortized cost

Financial liabilities

Accounts payable and accrued liabilities Amortized cost

Distributions payable Amortized cost

Revolver, term loans and mortgages Amortized cost

TIF notes payable Amortized cost

Financial liabilities within other liabilities 3 Amortized cost

Exchangeable units of subsidiaries FVTPL1 Interest rate swaps are held in a hedge relationship, such that fair value movements are recognized in OCI as opposed to profit or loss.2 Relates to funds held in escrow included in other assets.3 Relates to rental security deposits included in other liabilities.

All financial assets and liabilities are measured at fair value on initial recognition. Transaction costs, other than those related to financialinstruments classified as FVTPL, are capitalized to the carrying amount of the instrument. These costs include amortization of discounts orpremiums on borrowings, fees and commissions paid to agents, brokers and advisers, transfer taxes, and duties that are incurred in connectionwith the arrangement of borrowings.

Exchangeable units of subsidiaries are classified as FVTPL and are measured at fair value with gains and losses recognized in net income asunit expense. Prior to May 11, 2018, REIT units were classified as FVTPL and were measured at fair value with gains and losses recognized innet income as unit expense. Effective May 11, 2018, REIT units have been classified as equity instruments and accordingly been presentedwithin unitholders' equity.

Subsequent to initial recognition, debt instruments or other financial liabilities are measured at amortized cost, using the effective interestmethod or at FVTPL. All recognized financial assets are measured subsequently in their entirety at either amortized cost or FVTPL, dependingon the classification of the financial assets.

Fair value changes on derivatives that are designated and qualify for hedge accounting are recognized in OCI. Fair value changes on derivativesthat are not designated or do not qualify for hedge accounting are recognized in profit or loss.

The REIT derecognizes a financial asset or liability when its contractual rights or obligations expire, or it transfers its rights or obligations ina transaction in which substantially all the risks and rewards of ownership are transferred. Any rights and obligations created or retained bythe REIT in a transfer are recognized as separate assets or liabilities.

Impairment of financial assets

The REIT uses an expected credit loss (“ECL”) impairment model for financial assets measured at amortized cost or debt instruments measuredat FVTOCI. The ECL model uses an allowance for expected credit losses being recorded regardless of whether or not there has been an actualloss event. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of afinancial instrument. In contrast, 12‑month ECL represents the portion of lifetime ECL that is expected to result from default events on afinancial instrument that are possible within 12 months after the reporting date.

The REIT recognizes lifetime ECL for trade receivables and 12-month ECL for TIF notes receivables and notes receivable. The amount of theexpected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financialinstrument. If the credit risk is determined to increase significantly over the period, then the REIT would recognize lifetime ECL for TIF notesreceivables and notes receivable.





xiv. Fair values

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participantsat the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimatingthe fair value of an asset or a liability, the REIT considers the characteristics of the asset or liability if market participants would take thosecharacteristics into account when pricing the asset or liability at the measurement date, unless otherwise noted.

Except as noted, the carrying value of the REIT's financial assets and financial liabilities approximate their fair values because of the shortperiod until receipt or payment of cash. The fair value of financial liabilities measured at amortized cost but disclosed at fair value in note 19Financial instruments are estimated based on discounted future cash flows using discount rates that reflect current market conditions forinstruments with similar terms and risks. Fair value measurements recognized in the statements of financial position are categorized using afair value hierarchy that reflects the significance of inputs used in determining the fair values:

• Level 1: Quoted prices in active markets for identical assets or liabilities that the REIT can access at the measurement date.

• Level 2: Inputs other than quoted prices included in Level 1, which are observable for the asset or liability, either directly or indirectly.

• Level 3: Inputs that are not based on observable market data.

Each type of fair value is categorized based on the lowest level input that is significant to the fair value measurement in its entirety.

Exchangeable units of subsidiaries are measured at fair value based on the market trading price of REIT units consistent with Level 1. EffectiveMay 11, 2018, REIT units have been classified as equity instruments and accordingly been presented within unitholders' equity. Prior to May11, 2018, REIT units were measured at fair value based on the market trading price of REIT units consistent with Level 1. All other fair valuemeasurements for non-derivative financial instruments are measured using Level 2 or Level 3 inputs.

The fair values of derivative instruments are calculated using quoted rates. The fair value of interest rate swaps, which is a Level 2 input, arecalculated as the present value of estimated future cash flows discounted at actively quoted interest rates and an applicable yield curve forthe duration of the instruments.

xv. Derivative financial instruments and hedging activities

A derivative financial instrument is initially recognized at its fair value on the date the contract is entered into and is subsequently carried atits fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument,and if so, the nature of the item being hedged.

The REIT uses certain financial instruments to hedge its exposure to certain market risks arising from operational, financial and investingactivities. At the inception of the hedge transaction, the REIT documents the following:

• the type of hedge;

• the relationship between the hedging instrument and hedged item;

• hedge effectiveness; and

• the REIT's risk management objective and strategy for undertaking various hedge transactions.

The REIT documents and assesses hedge effectiveness on an ongoing basis, whether the hedging instrument is highly effective in offsettingchanges in cash flows of hedged items.

Cash flow hedge – interest rate swaps

The REIT has entered into pay-fixed, receive-float interest rate swap contacts that are a cash flow hedge for interest rate risk exposure onthe REIT's floating rate debt. These contracts entitle the REIT to receive interest at floating rates on a notional principal amount and obligesthe REIT to pay interest at a fixed rate on the same notional principal amount. This allows the REIT to raise borrowings at floating rates andswap them into fixed rates.

The interest rate swaps are designated as cash flow hedges in OCI. Accordingly, the changes in fair value of the swaps are recorded in thehedging reserve in OCI to the extent the hedges are highly effective in offsetting the hedged risk.

As the critical terms of the interest rate swap contracts and their corresponding hedged items are the same, the REIT performs a qualitativeassessment of effectiveness and it is expected that the value of the interest rate swap contracts and the value of the corresponding hedgeditems will systematically change in opposite direction in response to movements in the underlying interest rates. The REIT expects the interestrate swap contracts and their corresponding hedged items to operate on a one-to-one basis. The main source of hedge ineffectiveness inthese hedge relationships is the effect of the counterparty and the REIT's own credit risk on the fair value of the interest rate swap contracts,which is not reflected in the fair value of the hedged item attributable to the change in interest rates.





xvi. Deferred unit incentive plan

The REIT has a deferred unit incentive plan (“DUP”) whereby trustees of the REIT, who are not also members of management may elect toreceive all or a portion of their Trustee fees in the form of deferred units that vest immediately upon grant. Officers of the REIT may elect toacquire deferred class U units, which represent a right to receive class U units, in lieu of equivalent amounts of asset management fees formanagement services rendered by Slate Asset Management L.P. (the "Manager").

The deferred units are equivalent in value to REIT units and accumulate additional deferred units at the same rate that distributions are paidon REIT units in relation to the market value of REIT units, as defined by the DUP. Deferred units may be redeemed by a participant for aperiod of two years after the participant ceases to be a trustee or officer of the REIT in whole or in part for cash or REIT units. The value ofdeferred units when converted to cash will be equivalent to the market value of REIT units on the date of the redemption request. Deferredunits have been classified as a liability recorded within the other liabilities account balance, and measured at fair value. Initial recognition ofthe deferred units is recorded as a general and administrative expense. Subsequent changes in the fair value of deferred units are recordedin net income as unit expense.

xvii. Finance costs

Finance costs comprise interest expense on borrowings, amortization or derecognition of mark-to-market adjustment on assumption ofmortgages, amortization of transaction cost and accretion expense.

Transaction costs associated with financial liabilities measured at amortized cost, such as mortgages payable and the revolving credit facilityare netted against the carrying amount of the related debt instrument and amortized using the effective interest method over the term ofthe related debt.

xviii. Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates andassumptions that affect the application of accounting policies and the amounts reported in the consolidated financial statements andaccompanying disclosures. Although these estimates are based on management’s knowledge of current events and actions the REIT mayundertake in the future, actual results may differ from these estimates.

Judgments

Information about critical judgments in applying accounting policies that have the most significant effect on amounts recognized in theconsolidated financial statements is discussed below:

• Business combinations

The REIT acquires real estate properties. At the time of acquisition, the REIT considers whether or not the acquisition represents theacquisition of a business. The REIT accounts for an acquisition as a business combination where an integrated set of activities is acquiredin addition to the property. Consideration is made to the extent to which significant processes are acquired and the extent of ancillaryservices provided by the property, e.g. maintenance, cleaning, security, bookkeeping, etc. The significance of any process is judged withreference to the guidance in IAS 40 regarding ancillary services.

When the acquisition of a property does not represent a business, it is accounted for as an acquisition of assets and liabilities. The costof the acquisition is allocated to the assets and liabilities acquired based upon their relative fair values, and no goodwill is recognized.

• Lease contracts

The REIT has entered into property leases on its property portfolio. The REIT makes judgments in determining whether certain leases,in particular those leases with long contractual terms, are operating or finance leases.

• Classification of REIT units and exchangeable units of subsidiaries

In determining whether REIT units and exchangeable units of subsidiaries should be classified as liabilities or equity, management hasassessed whether REIT units contain a contractual agreement to deliver cash or another financial asset to another entity, whether theunits are puttable, and whether the criteria in IAS 32 that permit classification of a puttable instrument as equity have been satisfied.

Estimates

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period inwhich the estimates are revised and in any future periods affected. Estimates that have the most significant impact on the consolidatedfinancial statements include:





• Valuation of properties

On a quarterly basis, for properties that are not independently valued, the fair value of properties is determined by management usingcurrent leasing and market assumptions. For properties that are independently valued, management verifies inputs used to prepare thevaluation report and holds discussions with the independent valuator.

The determination of the fair value of property requires the use of estimates such as future cash flows from assets, such as tenant profiles,future revenue streams and overall repair and condition of the property, capitalization rates and discount rates applicable to those assets.These estimates are based on market conditions existing at the reporting date.

The following approaches, either individually or in combination, are used by management, together with the appraisers, in theirdetermination of the fair value of the properties:

a. Income approach

This approach derives market value by estimating the future cash flows that will be generated by the property and then applyingan appropriate capitalization rate or discount rate to those cash flows. This approach can utilize the overall income capitalizationmethod and/or the discounted cash flow method, as described below:

Overall income capitalization method: Year one income is stabilized and capitalized at a rate appropriate for each property. Themost significant assumptions in determining fair values under the overall capitalization method include:

i. Stabilized net operating income – based on the location, type and quality of the properties and supported by existing lease terms,or external evidence such as current market rents for similar properties, adjusted for estimated vacancy rates based on currentand expected future market conditions after expiry of any current lease and expected maintenance costs.

ii. Capitalization rate – based on location, size and quality of the properties and considering market data at the valuation date.

Discounted cash flow method: Fair values are primarily determined by discounting the expected future cash flows, generally overa term of 10 years, including a terminal value based on the application of a capitalization rate to estimated year 11 net operatingincome.

For both methods, capitalization rates are the most significant assumption in determining fair value. The REIT uses leasing history,market reports, tenant profiles and available appraisals, among other things, in determining the most appropriate assumptions.

b. Direct comparison approach

This approach involves comparing or contrasting the recent sale, listing or optioned prices of properties comparable to the subjectand adjusting for any significant differences between them.

The REIT determines the fair value of properties based upon either the overall income capitalization method or the discounted cashflow method, or in certain circumstances a combination of both methods. At December 31, 2019 and December 31, 2018, the fair valueof the REIT's properties is determined primarily using the overall income capitalization method. The REIT uses the sales price when afirm contract for the sale of a property exists.

The fair values of properties are measured individually without consideration to their aggregate value on a portfolio basis. No considerationis given to diversification benefits related to single property tenant risk and geography, the value of assembling a portfolio or to theutilization of a common management platform, amongst other benefits. As a result, the fair value of the REIT’s properties taken inaggregate may differ from the fair value of properties measured individually in the REIT’s consolidated statements of financial position.

xix. Application of new and revised IFRSs

The REIT has adopted the following new accounting standards:

IFRS 16, Leases

IFRS 16 replaces IAS 17 Leases ("IAS 17"), and IFRIC 4, Determining whether an arrangement contains a lease, and is effective January 1,2019. The objective of IFRS 16 is to report information that faithfully represents lease transactions and provides a basis for users of financialstatements to assess the amount, timing and uncertainty of cash flows arising from leases. To meet that objective, a lessee should recognizeassets and liabilities arising from a lease.

IFRS 16 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term ofmore than twelve months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing itsright to use the underlying leased asset and a lease liability representing its obligation to make lease payments. This standard substantiallycarries forward the lessor accounting requirements of IAS 17 while requiring enhanced disclosures to be provided by lessors. Other areasof the lease accounting model have been impacted, including the definition of a lease.





As a result of the adoption of IFRS 16, the REIT separately discloses variable lease payments not connected to an index or rate includingproperty tax recoveries and percentage rents. The adoption of the new standard did not have a material impact to the REIT's consolidatedfinancial statements. As a landlord, all of the REIT's leases are considered operating leases under IFRS 16.

IFRS 9, Financial Instruments ("IFRS 9") and IFRS 7, Financial Instruments: Disclosures ("IFRS 7")

In September 2019, the IASB issued Interest Rate Benchmark Reform – Amendments to IFRS 9 and IFRS 7. These amendments modify specifichedge accounting requirements to allow hedge accounting to continue for affected hedges during the period of uncertainty before the hedgeditems or hedging instruments affected by the current interest rate benchmarks are amended as a result of the on‑going interest rate benchmarkreforms.

The amendments are relevant to the REIT given that it applies hedge accounting to its benchmark interest rate exposure. The REIT hasfloating rate debt, linked to U.S. London Interbank Offering Rate ("LIBOR"), which the REIT cash flow hedges using interest rate swap contracts.The amendments permit continuation of hedge accounting even though there is uncertainty about the timing and amount of the hedgedcash flows due to the interest rate benchmark reforms.

The REIT will retain the cumulative gain or loss in the cash flow hedge reserve for designated cash flow hedges that are subject to interestrate benchmark reforms even though there is uncertainty arising from the interest rate benchmark reform with respect to the timing andamount of the cash flows of the hedged items. Should the REIT consider the hedged future cash flows are no longer expected to occur dueto reasons other than interest rate benchmark reform, the cumulative gain or loss will be immediately reclassified to profit or loss.

The REIT has chosen to early apply the amendments to IFRS 9 for the reporting period ending December 31, 2019, which are mandatory forannual reporting periods beginning on or after January 1, 2020. Adopting these amendments allows the REIT to continue hedge accountingduring the period of uncertainty arising from interest rate benchmark reforms.

xx. Future accounting policies

IFRS 3, Business Combinations ("IFRS 3")

IFRS 3 has been amended and is effective January 1, 2020. The amendments have narrowed and clarified the definition of a business. Theobjective of the amendment is to assist companies in determining whether an acquisition made is of a business or a group of assets. It alsopermits a simplified assessment of whether an acquired set of activities and assets is a group of assets rather than a business.





4. ACQUISITION AND DISPOSITIONS

Acquisition

During the year ended December 31, 2019, the REIT acquired a 50% interest in Windmill Plaza, a joint-venture partnership with The KrogerCompany. Refer to note 6 Equity investment for further details.

Property Purchase date Location Purchase price

Windmill Plaza January 25, 2019 Sterling Heights, Michigan $ 7,299

The purchase price of the interest in Windmill Plaza was as follows:

Contribution of note receivable and accrued interest $ 11,644

Cash contributions 3,131

Proceeds from partner investment (7,476)

Purchase price $ 7,299

Distribution of financing proceeds (2,551)

Net cost of equity investment $ 4,748

The REIT acquired one property during the year ended December 31, 2018.

Property Purchase date Location Purchase price

Plymouth Station August 31, 2018 Plymouth, Minnesota $ 20,465

The net assets acquired for this acquisition are as follows:

Purchase price $ 20,465

Transaction costs 622

Property $ 21,087

Working capital items (299)

Assumed debt (8,194)

Total $ 12,594

Dispositions

The REIT disposed of 10 properties and seven property outparcels during the year ended December 31, 2019 as follows:

PropertyNumber ofoutparcels Disposition date Location Sales price

Eastpointe Shopping Center 1 January 11, 2019 Clarksburg, West Virginia $ 1,530

Locust Grove 1 January 22, 2019 Locust Grove, Georgia 1,725

Wellington Park N/A February 28, 2019 Cary, North Carolina 15,010

Wausau Pick 'n Save N/A March 6, 2019 Wausau, Wisconsin 9,900

Kennywood Shops N/A June 13, 2019 Pittsburgh, Pennsylvania 7,000

North Augusta Plaza 1 July 22, 2019 North Augusta, South Carolina 1,360

Wedgewood Commons 3 Various 1 Stuart, Florida 8,590

Seminole Oaks N/A August 26, 2019 Seminole, Florida 11,700

County Line Plaza N/A August 27, 2019 Philadelphia, Pennsylvania 9,200

Derry Meadows Shoppes 1 September 9, 2019 Derry, New Hampshire 500

Springboro Plaza N/A September 13, 2019 Dayton, Ohio 7,200

Oakland Commons N/A September 16, 2019 Bloomington, Illinois 7,520

Buckeye Plaza N/A December 18, 2019 Cleveland, Ohio 4,500

North Pointe N/A December 19, 2019 Columbia, South Carolina 9,210

Merchants Square N/A December 20, 2019 Riverdale, Georgia 15,720

Total $ 110,6651 The REIT disposed of three property outparcels on July 29, 2019, July 31, 2019 and August 6, 2019, for a total of $8.6 million.

Sales price $ 110,665

Disposition costs (6,698)


Total $ 103,447





The REIT disposed of two properties and 13 property outparcels during the year ended December 31, 2018 as follows:

PropertyNumber ofoutparcels Disposition date Location Sales price

Westhaven Town Center 1 January 9, 2018 Franklin, Tennessee $ 9,100

Mooresville Consumer Square 4 Various 1 Mooresville, North Carolina 20,671

Norwin Town Square 1 March 16, 2018 North Huntingdon, Pennsylvania 1,360

Waterbury Plaza 1 April 17, 2018 Waterbury, Connecticut 3,300

Field Club Commons N/A September 26, 2018 New Castle, Pennsylvania 9,800

Roxborough Marketplace 2 Various 2 Littleton, Colorado 2,260

North Branch Marketplace 1 November 19, 2018 North Branch, Minnesota 1,760

North Lake Commons 1 December 4, 2018 Lake Zurich, Illinois 1,252

Cudahy Center N/A December 4, 2018 Cudahy, Wisconsin 2,075

Battleground Village 1 December 13, 2018 Greensboro, North Carolina 1,818

Stonefield Square 1 December 24, 2018 Louisville, Kentucky 1,700

Total $ 55,0961 The REIT disposed of four property outparcels on February 15, 2018, August 22, 2018 and December 18, 2018, for a total of $20.7 million.2 The REIT disposed of two property outparcels on October 11, 2018 and November 5, 2018, for a total of $2.3 million.

Sales price $ 55,096

Disposition costs (2,201)


Total $ 52,613





5. PROPERTIES

On December 31, 2019, the REIT owned 76 properties. The change in properties is as follows:


Beginning of the period $ 1,382,955 $ 1,454,463

Acquisition — 21,087

Capital 2,514 5,555

Leasing costs 1,562 2,871

Tenant improvements 5,290 8,125

Development and expansion capital 6,686 9,864

Straight-line rent 1,640 2,572

Dispositions 4 (110,665) (55,096)

IFRIC 21 property tax adjustment — 200

Change in fair value (1,446) (66,686)

End of the period $ 1,288,536 $ 1,382,955

Valuation assumptions used to estimate the fair value of the REIT's properties are as follows:

December 31, 2019 December 31, 2018

Capitalization rate range 6.00% – 9.50% 6.25% – 11.40%

Weighted average capitalization rate 7.45% 7.50%

Impact on fair value due to 25 basis point change in capitalization rates $ 44,800 $ 46,916

Impact on fair value due to $100,000 change in underlying annual stabilized income $ 1,341 $ 1,332

Under the fair value hierarchy, the fair value of the REIT’s properties is determined primarily using the overall income capitalization methodusing Level 3 inputs. The REIT uses the sales price when a firm contract for the sale of a property exists.





6. EQUITY INVESTMENT

The REIT accounts for its investment in Windmill Plaza, a grocery-anchored shopping centre located in Sterling Heights, Michigan, using theequity method. On January 25, 2019, the REIT acquired a 50% partnership interest in Windmill Plaza, in a joint-venture partnership with TheKroger Company for $7.3 million, before transaction costs. Consideration for the partnership interest included settlement of the REIT's notereceivable in the amount of $9.4 million and interest receivable of $2.2 million, net of assumed debt and cash on hand.

The change in the REIT's equity investment is as follows:

December 31, 2019

Beginning of the period $ —

Contribution of note receivable and accrued interest 11,644

Cash contributions 3,131

Distribution of financing proceeds (2,551)

Proceeds from partner investment (7,476)

Net cost of equity investment $ 4,748

Capital contributions 150

Share of income in equity investment 151

End of the period $ 5,049

The financial position of the REIT's equity investment is as follows:

December 31, 2019

Assets

Property $ 22,454

Current assets 1,296

$ 23,750

Liabilities

Debt 1 $ 11,466

Other non-current liabilities 15

Current liabilities 2,171

$ 13,652

Net assets at 100% $ 10,098At the REIT's 50% interest $ 5,049

1 The debt bears interest at a rate of 4.54% at December 31, 2019 and has a maturity date of January 28, 2022.

The following is a summary of income of the REIT's equity investment:

Year ended December 31, 2019

Rental revenue $ 524

Property operating expenses (274)

Other expenses 30

Interest expense and other financing costs, net (454)

Change in fair value of property 476

Net income and comprehensive income at 100% $ 302At the REIT's 50% interest $ 151

Management fees

Pursuant to the terms of the property management and leasing agreement and the development services agreement the REIT providesproperty, leasing and development management services for Windmill Plaza. In return for its services, the REIT receives the following fees:

i property management fees calculated based on gross income of each tenant;

ii development fees for the management of the construction in adherence with the property's development plan; and

iii leasing commissions for all executed leases.

Total management fees earned by the REIT under the agreement were $0.3 million for the year ended December 31, 2019.





7. INTEREST RATE SWAPS

The REIT has entered into certain pay-fixed receive-float interest rate swap contracts to hedge the cash flow risk associated with monthlyU.S. LIBOR based interest payments on the REIT's floating rate debt.

The terms of the interest rate swaps are as follows:

Effective date November 2, 2016 September 1, 2017 August 22, 2018 August 22, 2018Total/

Weighted average

Pay-fixed rate 1.104% 1.715% 2.884% 2.925% 2.026%

Notional amount $ 300,000 $ 100,000 $ 175,000 $ 175,000 $ 750,000

Receive-floating rate One-month LIBOR One-month LIBOR One-month LIBOR One-month LIBOR

Maturity date February 26, 2021 September 22, 2022 August 22, 2023 August 22, 2025

Remaining term (years) 1.2 2.7 3.6 5.6 2.9

Subsequent to year end, the REIT terminated $150.0 million of its $300.0 million interest rate swap, with an effective date of November 2,2016. The realized gain as a result of the termination was blended into the pay-fixed rate of the REIT’s $100.0 million interest rate swap, withan effective date of September 1, 2017, which was reduced to 1.41% and resulted in an increase to the weighted average pay-fixed rate of theREIT's swap portfolio to 2.205%.

A reconciliation of the change in the fair value of the interest rate swaps and related deferred tax impact is as follows:

Fair value ofinterest rate swaps

Deferred income tax

Net impact after taxNote

Balance, December 31, 2018 $ 2,818 $ (740) $ 2,078

Change in fair value of cash flow hedges of interest rate riskincluded in the carrying amount of the hedged item (16,475) 4,318 (12,157)

Cumulative loss arising on cash flow hedges to profit or loss (4,374) 1,146 (3,228)

Net payments received 16 (1,790) 469 (1,321)

Balance, December 31, 2019 $ (19,821) $ 5,193 $ (14,628)

Fair value ofinterest rate swaps

Deferred income tax

Net impact after taxNote

Balance, December 31, 2017 $ 10,607 $ (2,775) $ 7,832

Change in fair value of cash flow hedges of interest rate riskincluded in the carrying amount of the hedged item (5,722) 1,495 (4,227)

Net payments received 16 (2,067) 540 (1,527)

Balance, December 31, 2018 $ 2,818 $ (740) $ 2,078

A reconciliation of the interest rate swap asset and liability fair value positions is as follows:


Fair value asset position included in the carrying amount of the hedged item $ 1,761 $ 2,818

Fair value liability position included in the carrying amount of the hedged item (21,582) —

Total $ (19,821) $ 2,818





8. OTHER ASSETS

Other assets are comprised of the following:

Note December 31, 2019 December 31, 2018

Current

TIF notes receivable $ 372 $ 510

Note receivable 6 — 9,398

Funds held in escrow 140 119

Other 1 6 274 2,195

$ 786 $ 12,222

Non-current

TIF notes receivable 2,268 2,486

Funds held in escrow 25 25

$ 2,293 $ 2,511

Total $ 3,079 $ 14,7331 Other mainly includes interest accrued on a loan arrangement, recorded as a note receivable, from the REIT to a U.S. based entity in which Slate Asset Management L.P. has asignificant interest. Refer to note 6 Equity investment and note 22 Related parties for detail.

TIF notes receivable are issued by the City of St. Paul and by the City of Brainerd in Minnesota, related to the REIT’s Phalen Retail Centre andEast Brainerd Mall properties, respectively. The TIF notes obligate each municipality to pay certain tax increments resulting from increases,if any, from a reference amount in the taxable valuation of the respective property to the REIT.

On January 25, 2019, the note receivable and interest accrued on the note receivable were settled as part of the consideration for the acquisitionof Windmill Plaza in a 50% joint-venture partnership with The Kroger Company. Refer to note 6 Equity investment for further details.

9. ACCOUNTS RECEIVABLE

Accounts receivable is comprised of the following:


Rent receivable $ 3,475 $ 3,748

Allowance for doubtful accounts (673) (741)

Accrued recovery income 5,751 6,101

Other receivables 3,172 2,877

Total $ 11,725 $ 11,985

Rent receivable consists of base rent and operating expense recoveries billed to tenants. Accrued recovery income represents amounts thathave not been billed to the tenants and are generally billed and paid subsequent to the year in which they were incurred. Other receivablesis primarily comprised of the gross amount of consideration for property taxes paid directly by tenants, in accordance with IFRS 15.

The change in allowance for doubtful accounts is as follows:

Year ended December 31,2019 2018

Beginning of the period $ (741) $ (328)

Allowance for doubtful accounts (707) (717)

Bad debt write-off 327 107

Bad debt recovery 448 197

End of the period $ (673) $ (741)

The REIT measures the allowance at an amount equal to lifetime expected losses by taking into account past default experience and consideringboth current and potential bankruptcy, abandonment by tenants and certain tenant disputes.

The aging analysis of not credit-impaired rent receivable, net of allowance for doubtful accounts, is as follows:


Current to 30 days $ 1,629 $ 2,128

31 to 60 days 273 492

61 to 90 days 190 125

Greater than 90 days 710 262

Total $ 2,802 $ 3,007





10. DEBT

Debt held by the REIT at December 31, 2019 is as follows:

Maturity

Remainingextension

options Coupon

Propertiesprovided

as security

Fairvalue ofsecurity

Maximumavailable Principal

Availableto be

drawn 1

Revolver 1 2 February 26, 2020 One 1-year L+200 bps 1 3 N/A 4 N/A 4 $ 362,500 $ 76,899 $ 285,601

Term loan 1 February 26, 2021 None L+200 bps 1 3 N/A 4 N/A 4 362,500 362,500 —

Term loan 2 1 February 9, 2023 None L+200 bps 1 3 N/A 4 N/A 4 250,000 250,000 —

Mortgage March 1, 2021 None 5.75% 1 20,255 10,141 10,141 —

Mortgage January 1, 2025 None 3.80% 3 80,645 43,401 43,401 —

Mortgage July 1, 2025 None 4.14% 5 77,855 41,753 41,753 —


Total $ 1,077,818 $ 792,217 $ 285,601

Debt held by the REIT at December 31, 2018 is as follows:

Maturity

Remainingextension

options Coupon

Propertiesprovided

as security

Fairvalue ofsecurity

Maximumavailable Principal

Availableto be

drawn 1

Revolver 1 2 February 26, 2020 One 1-year L+200 bps 1 3 N/A 4 N/A 4 $ 362,500 $ 144,543 $ 217,957

Term loan 1 February 26, 2021 None L+200 bps 1 3 N/A 4 N/A 4 362,500 362,500 —

Term loan 2 1 February 9, 2023 None L+200 bps 1 3 N/A 4 N/A 4 250,000 250,000 —

Mortgage March 1, 2021 None 5.75% 1 22,084 10,931 10,931 —


Mortgage June 15, 2025 None 4.14% 6 93,077 55,728 55,728 —


Total $1,094,040 $ 876,083 $ 217,9571 Debt available to be drawn is subject to certain covenants as provided in the REIT's lending agreements, including generally, a maximum of 65% Consolidated Total Indebtednessto Gross Asset Value. The calculation of Consolidated Total Indebtedness to Gross Asset Value is provided in note 20 Capital Management. The revolver, term loan and term loan2 provide for different spreads over one-month U.S. LIBOR depending on the ratio of Consolidated Total Indebtedness to Gross Asset Value. The applicable spread where ConsolidatedTotal Indebtedness to Gross Asset Value is; (i) less than or equal to 45% is 155 bps; (ii) greater than 45% but less than or equal to 55% is 175 bps; (iii) greater than 55% but less thanor equal to 60% is 200 bps; and (iv) greater than 60% is 225 bps.2 The revolver requires a stand-by fee to be paid in an amount equal to 0.25% of the unused portion of the revolver where the unused portion is greater than or equal to 50% ofthe maximum amount available and 0.15% of the unused portion of the revolver where the unused portion is less than 50% of the maximum amount available, calculated daily.3 "L" means LIBOR and "bps" means basis points.4 The revolver, term loan and term loan 2 are secured by a general pledge of equity of certain subsidiaries of the REIT. Collectively, those subsidiaries hold an interest in 65 of theREIT's properties.





The carrying value of debt held by the REIT at December 31, 2019 is as follows:

Effectiverate 1 Principal

Mark-to-market ("MTM")

adjustmentsand costs

Accumulatedamortization of

MTMadjustments

and costs 2 Carrying

amount Current Non-current

Revolver 4.27% $ 76,899 $ (2,186) $ 2,087 $ 76,800 $ 76,800 $ —

Term loan 4.26% 362,500 (3,877) 3,153 361,776 — 361,776

Term loan 2 4.26% 250,000 (1,839) 711 248,872 — 248,872

Mortgage 5.75% 10,141 2,003 (1,633) 10,511 321 10,190

Mortgage 3.80% 43,401 (1,549) 680 42,532 1,056 41,476

Mortgage 4.14% 41,753 (1,079) 585 41,259 1,771 39,488

Mortgage 5.50% 7,523 127 (5) 7,645 507 7,138

Total $ 792,217 $ (8,400) $ 5,578 $ 789,395 $ 80,455 $ 708,940

The carrying value of debt held by the REIT at December 31, 2018 is as follows:

Effectiverate 1 Principal

Mark-to-market

("MTM")adjustments

and costs

Accumulatedamortization

of MTMadjustments

and costs 2 Carrying

amount Current Non-current

Revolver 4.01% $ 144,543 $ (2,186) $ 1,465 $ 143,822 $ — $ 143,822

Term loan 4.14% 362,500 (3,877) 2,463 361,086 — 361,086

Term loan 2 4.00% 250,000 (1,839) 372 248,533 — 248,533

Mortgage 5.75% 10,931 2,003 (1,310) 11,624 319 11,305

Mortgage 3.80% 44,417 (1,549) 495 43,363 1,103 42,260

Mortgage 4.14% 55,728 (1,079) 396 55,045 1,182 53,863

Mortgage 5.50% 7,964 127 (2) 8,089 441 7,648

Total $ 876,083 $ (8,400) $ 3,879 $ 871,562 $ 3,045 $ 868,5171 The effective interest rate for the revolver, term loan and term loan 2 includes the impact of unamortized financing costs not yet recorded in interest expense under the effectiveinterest method. The revolver, term loan and term loan 2 effective rates are based on the applicable U.S. LIBOR rate under borrowings as at December 31, 2019.2 Excludes the impact of any available extension options not yet exercised.

During the year ended December 31, 2019, the REIT made principal repayments, net of drawdowns totaling $83.9 million on the REIT's revolverand mortgages funded by cash received from the disposal of 10 properties and seven property outparcels and cash from operations.

On February 21, 2020, the REIT refinanced its existing revolving credit facility and term loan for four- and five-year terms, respectively, for anaggregate of $525.0 million and reduced pricing for its $250 million term loan. The revolver, term loan and term loan 2 bears interest at U.S.LIBOR plus an applicable margin.





11. REIT UNITS AND EXCHANGEABLE UNITS OF SUBSIDIARIES

At December 31, 2019, the REIT has the following REIT units issued and outstanding, in thousands of units:

Class A Class I Class U

Authorized for issue Unlimited Unlimited Unlimited

Issued and outstanding 247 282 40,463

Each class of the exchangeable units issued by the REIT's subsidiaries are presented as financial liabilities in accordance with IAS 32.

Each REIT unit confers the right to one vote at any meetings of REIT unitholders. The REIT is also authorized to issue an unlimited numberof special voting units. Special voting units are only issued in tandem with the issuance of securities redeemable for or exchangeable intoREIT units. The special voting units do not have any economic entitlement in the REIT with respect to distributions but provide the holderwith the same voting rights in the REIT as a holder of REIT units. The GAR B exchangeable units are accompanied by an equivalent number

of special voting units.

Each REIT unit entitles the holder to the same rights and obligations as any other REIT unitholder and no REIT unitholder is entitled to anyprivilege, priority or preference in relation to any other holder of REIT units of class A units, class I units and class U units of the REIT toparticipate in distributions made by the REIT including distributions of net income, net realized capital gains or other amounts and, in theevent of termination or winding-up of the REIT, in the net assets of the REIT remaining after satisfaction of all liabilities. REIT units will befully paid and non-assessable when issued and are transferable.

The REIT's Declaration of Trust grants holders of class A units and class I units of the REIT the right to convert all or any portion of theirclass A units and class I units of the REIT, at any time (the “conversion date”), into class U units by giving written notice to the REIT. On theapplicable conversion date, the REIT will deliver to the class A unitholder or class I unitholder the applicable number of class U units for eachclass A unit or class I unit converted by such unitholder.

With certain restrictions, the unitholders have the right to require the REIT to redeem their units on demand. Upon receipt of the redemptionnotice by the REIT, all rights to and under the units tendered for redemption shall be surrendered and the holder thereof shall be entitled toreceive a price per unit as determined by a market formula and shall be paid in accordance with the conditions provided for in the Declarationof Trust.

Effective March 15, 2018 the REIT elected to suspend its distribution reinvestment plan ("DRIP"), which allowed holders of REIT units to electto receive their distributions in the form of class U units.

Exchangeable units of subsidiaries

Exchangeable units of subsidiaries are redeemable at the option of the holder, for cash or class U units of the REIT as determined by theREIT. Distributions paid on exchangeable units of subsidiaries are recorded as unit expense in the period in which they become payable.

Exchangeable units of subsidiaries are re-measured based on the quoted closing price of REIT units into which they are exchangeable withchanges in fair value recognized in net income as unit expense.

Subdivision

In the 2018 year, the REIT completed various steps to have its units presented as equity in its consolidated financial statements. The changesincluded the approval of a special resolution of an amendment to and restatement of the Declaration of Trust of the REIT (the “Third A&RDOT”) making the features of the class A units, class I units and class U units identical among all three classes, among other things. Also onMay 1, 2018, the board of trustees of the REIT approved the subdivision of each of the: (i) class A units issued and outstanding on May 3, 2018(the “record date”) on the basis of a subdivision ratio of one pre-subdivision class A unit for 1.0078 post-subdivision class A units; and (ii)class I units issued and outstanding on the record date on the basis of a subdivision ratio of one pre-subdivision class I unit for 1.0554 classI units (the "Subdivision"). The Third A&R DOT and the Subdivision were undertaken contemporaneously and the impact of such actions didnot change the relative economics of the different classes of units of the REIT.

The Subdivision was completed on May 11, 2018. As a consequence of the Subdivision, the proportionate entitlement of the class A units andclass I units with respect to distributions from the REIT has been adjusted to 1.0 and all class A units, class I units and class U units have equalrights with respect to distributions from the REIT, redemptions of units and on the termination of the REIT. Each class A unit and each classI unit have remained convertible into a class U unit but the conversation ratio is on a one-for-one-basis. The REIT issued an additional 3thousand class A units and 15 thousand class I units as a result of the Subdivision. The fair value of the REIT units of $435.3 million at May11, 2018 were classified as equity. Prior to May 11, 2018, units of the REIT were presented as a liability in its consolidated financial statements.

Normal course issuer bid

The REIT has a normal course issuer bid (“NCIB”) which was most recently renewed on May 26, 2019. The NCIB remains in effect until theearlier of May 25, 2020 or the date on which the REIT has purchased an aggregate of 3.9 million class U units, representing 10% of the REIT'spublic float of 38.5 million class U units at the time of entering the NCIB through the facilities of the TSX.

For the year ended December 31, 2019, 1.9 million class U units have been purchased and subsequently canceled under the NCIB for a totalcost, including transaction costs, of $18.8 million at an average price of $9.90.

Substantial issuer bid

On January 16, 2019, the REIT commenced a substantial issuer bid (the "offer"), pursuant to which the REIT offered to purchase up to 4.2million class U units at a purchase price of C$12.54 (USD$9.51). On February 20, 2019, the offer expired and the REIT had taken up and paidfor 0.3 million class U units for an aggregate cost of $3.2 million or C$4.2 million, excluding fees and expenses related to the offer. The classU units purchased for cancellation under the offer represents 0.8% of the diluted class U units outstanding, immediately prior to the expiryof the offer.





REIT units and exchangeable units of subsidiaries outstanding during the period and their respective class U equivalent amounts if convertedis as follows, in thousands of units:

REIT unitsExchangeable units of

subsidiaries Total class Uunits

equivalent Class / type U A I SR1 1 SR2 1 GAR B

Balance, December 31, 2018 41,524 292 282 220 1,603 388 44,309

Repurchased (2,237) — — — — — (2,237)

Exchanged 1,176 (45) — (192) (683) (256) —

Class U units equivalent, December 31, 2019 40,463 247 282 28 920 132 42,072

REIT unitsExchangeable units of

subsidiaries Total class Uunits

equivalentClass / type U A I SR1 1 SR2 1 GAR B

Balance, December 31, 2017 43,482 309 282 220 1,603 496 46,410

Issued 117 — — — — — 117

Repurchased (2,218) — — — — — (2,218)

Issued under subdivision — 3 15 — — — —

Exchanged 143 (20) (15) — — (108) —

Class U units equivalent, December 31, 2018 41,524 292 282 220 1,603 388 44,3091 "SR1" and "SR2" mean Slate Retail One exchangeable units and Slate Retail Two exchangeable units, respectively.

The change in the carrying amount of exchangeable units of subsidiaries is as follows:


Beginning of the period $ 19,045 $ 24,075

Exchanged (10,839) (1,072)

Change in fair value 2,720 (3,958)

End of the period $ 10,926 $ 19,045

The change in the carrying amount of REIT units of subsidiaries during the year ended December 31, 2018 is as follows:

REIT units

Balance, December 31, 2017 $ 457,590

Issued under the DRIP 1,147

Repurchased (4,747)

Exchanged 862

Change in fair value 1 (19,567)

Balance, May 11, 2018 $ 435,2851 Effective May 11, 2018, the class A, class I and class U units of the REIT have been presented within unitholders' equity.

Deferred unit plans

Trustees of the REIT who are not members of management may elect to receive all or a portion of their trustee fees in the form of deferredunits that vest immediately upon grant.

The REIT also has a DUP for officers of the REIT whereby officers may elect to receive deferred class U units, which represent a right toreceive class U units, in lieu of an equivalent amount of asset management fees for management services rendered by the Manager.

The deferred units are equivalent in value to REIT units and accumulate additional deferred units at the same rate that distributions are paidon REIT units in relation to the market value of REIT units.





The change in deferred units is as follows, in thousands of units:


Beginning of the period $ 115 $ 71

Reinvested distributions 11 7

Issuances 22 37

Redemption (13) —

End of the period 135 115Fair value of units 1 $ 1,365 $ 993

1 At the respective period end date.

Weighted average class U units outstanding

The following is the weighted average number of class U units outstanding on a fully diluted basis, in thousands of units:

December 31, 2019 December 31, 2018Class U units 41,361 42,739

Class A units 256 295

Class I units 282 286

Exchangeable units of subsidiaries 1,880 2,229

Deferred units 127 90

Total 43,906 45,639

Class U units outstanding

The following is the total number of class U units outstanding, if all other units of the REIT, its subsidiaries and its DUP, were converted orexchanged, as applicable, for class U units of the REIT, in thousands of units:

December 31, 2019 December 31, 2018Class U units 40,463 41,524

Class A units 247 292

Class I units 282 282


Deferred units 135 115

Total 42,207 44,424





12. INCOME TAXES

The REIT qualifies as a mutual fund trust for Canadian income tax purposes. The REIT intends to distribute all of its taxable income tounitholders and is entitled to deduct such distributions for Canadian income tax purposes. Accordingly, no provision for current income taxespayable is required, except for amounts incurred in Investment L.P.

Investment L.P. and GAR B made an election to be classified as corporations for U.S. federal tax purposes. Investment L.P. and GAR B aresubject to U.S. federal and state income taxation on their allocable shares in Slate Retail One L.P., a subsidiary of the REIT, and any subsidiarylimited partnership thereof.

The REIT is therefore subject to U.S. federal income taxation on its allocable share of rental income derived directly or indirectly through suchsubsidiary limited partnerships, on a net basis taking into account allowable deductions. Investment L.P. and GAR B are each subject to acombined federal and state income tax rate of 26.20% (December 31, 2018 – 26.22%). To the extent U.S. taxes are paid by Investment L.P. andGAR B such amounts will be creditable against an investor’s Canadian federal income tax liability to the extent permitted by Canadian taxlaw.

Total branch profit taxes paid as of December 31, 2019 was $1.0 million (December 31, 2018 – nil). Branch profit tax is tax imposed on U.S.earned income that is repatriated to Canada.

The loss carry-forwards and the tax effects of temporary differences that give rise to the recognition of deferred tax assets and liabilities isas follows:


Deferred tax assets

Deferred financing costs $ 61 $ 29

Financial instruments 4,489 —

Loss carry-forwards 5,035 11,555

$ 9,585 $ 11,584

Deferred tax liabilities

Financial instruments — 1,326

Properties 71,844 67,739

$ 71,844 $ 69,065

Deferred tax liabilities, net $ 62,259 $ 57,481

The following is a reconciliation of deferred tax liabilities during the period:


Beginning of the period $ 57,481 $ 63,537

Deferred tax recovery recorded in AOCI (4,787) (2,035)

Deferred tax expense (recovery) 9,565 (4,021)

End of the period $ 62,259 $ 57,481

A reconciliation between the expected income taxes based upon the statutory rates and the income tax expense (recovery) recognizedduring the period is as follows:


Net income (loss) before income taxes and unit (expense) income $ 40,357 $ (10,913)

Expected income tax expense (recovery) at Canadian statutory tax rates of 26.5% $ 10,695 $ (2,892)

Net foreign income and rate differential $ (2,067) $ (1,902)

Permanent differences 184 1

Other items 753 772

Deferred income tax expense (recovery) $ 9,565 $ (4,021)





13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities are comprised of the following:


Trade payables and accrued liabilities $ 11,366 $ 14,500

Prepaid rent 5,126 3,656

Tenant improvements payable 103 186

Other payables 4,802 4,606

Total $ 21,397 $ 22,948

Included in trade payables and accrued liabilities are operating expenses, property taxes, and capital and leasing expenses. Other payablesinclude trustee fees, accrued interest payable and other non-operating items.





14. REVENUE

Revenue is comprised of the following:


Rental revenue $ 104,887 $ 107,144

Common area maintenance recoveries 12,446 12,852

Property tax and insurance recoveries 19,596 19,691

Percentage rent 511 348

Other revenue 1 3,875 4,178

Total $ 141,315 $ 144,2131 Other revenue includes straight-line rent, ground rent, termination fees, storage rent, and non-rental income.

The REIT enters into long-term lease contracts with tenants for space in the REIT’s properties. Leases generally provide for the tenant to paybase rent, with provisions for contractual increases in base rent over the term of the lease, plus operating costs and realty tax recoveries.Certain leases have limitations or escalation restrictions on the amount of recoveries or cost reimbursements, which the tenant is obligatedto pay regardless of the actual costs incurred by the REIT to operate and maintain the properties.

The REIT’s existing leases have a weighted average outstanding term of 5.0 years (December 31, 2018 – 4.8 years) certain of which includeclauses to enable periodic upward revisions in rental rates.

The future minimum lease payments from the REIT’s non-cancellable operating leases as a lessor are as follows:


In one year or less $ 97,221 $ 105,796

In more than one year but not more than five years 264,653 287,676

In more than five years 109,326 130,339

Total $ 471,200 $ 523,811

15. OTHER EXPENSES

Other expenses are comprised of the following:


Asset management fees 22 $ 5,516 $ 5,925

Bad debt expense 883 1,105

Professional fees and other 3,138 2,773

Franchise and business taxes 1,180 503

Total $ 10,717 $ 10,306

16. INTEREST EXPENSE AND OTHER FINANCING COSTS, NET

Interest expense and other financing costs, net are comprised of the following:


Interest on debt and finance charges 10 $ 37,190 $ 36,805

Interest rate swaps, net settlement 7 (1,790) (2,067)

Foreign exchange forward contract, net settlement (24) —

Interest income (19) (95)

Interest income on notes receivable (51) (752)

Amortization of finance charges 10 2,062 1,950

Amortization of MTM premium 10 (364) (353)

Interest income on TIF notes receivable (74) (99)

Interest expense on TIF notes payable — 122

Amortization of deferred gain on TIF notes (87) (87)

Total $ 36,843 $ 35,424





17. DISPOSITION COSTS

Disposition costs for the year ended December 31, 2019 were $6.7 million (year ended December 31, 2018 – $2.2 million), and relate to costsof the disposition of properties and property outparcels.

18. UNIT EXPENSE (INCOME)

Unit expense (income) is comprised of the following:


REIT units distributions 1 11 $ — $ 12,342

Exchangeable units of subsidiaries distributions 11 1,569 1,871

Change in fair value of DUP 180 (156)

Change in fair value of REIT units 1 11 — (19,452)

Change in fair value of exchangeable units of subsidiaries 11 2,720 (3,958)

Total $ 4,469 $ (9,353)1 Effective May 11, 2018, the class A, class I and class U units of the REIT have been presented within unitholders' equity. Refer to note 11 REIT units and exchangeable units ofsubsidiaries for further detail.

Unit distributions

Pursuant to the Declaration of Trust, the income of the REIT is distributed on dates and in amounts as determined by the board of trustees.

The following table summarizes the REIT's distributions and reconciliation to distributions paid or settled:


Declared

REIT units distributions 11 $ 35,862 $ 36,606

Exchangeable units of subsidiaries distributions 11 1,569 1,871

$ 37,431 $ 38,477

Add: Distributions payable, beginning of period 3,157 3,249

Less: Distributions payable, end of period (3,029) (3,157)

Distributions paid or settled $ 37,559 $ 38,569

Paid in cash $ 37,559 $ 37,422Reinvested in units 11 $ — $ 1,147





19. FINANCIAL INSTRUMENTS

Except as noted, the carrying value of financial assets and financial liabilities approximate their fair values because of the short period untilreceipt or payment of cash. The fair values in other financial liabilities are estimated based on discounted future cash flows using discountrates that reflect current market conditions for instruments with similar terms and risks.

The carrying amounts and fair values of the REIT’s financial instruments are as follows:

December 31, 2019 December 31, 2018Carrying amount Fair value Carrying amount Fair value

Financial assets

Cash $ 2,412 $ 2,412 $ 1,110 $ 1,110

Accounts receivable 11,725 11,725 11,985 11,985

Interest rate swaps 1,761 1,761 2,818 2,818

TIF notes receivable 2,640 2,703 2,996 3,038

Financial assets within other assets 1 165 165 144 144

Notes and other receivable — — 11,593 11,593

Total financial assets $ 18,703 $ 18,766 $ 30,646 $ 30,688


Accounts payable and accrued liabilities $ 21,397 $ 21,397 $ 22,948 $ 22,948

Distributions payable 3,029 3,029 3,157 3,157

Interest rate swaps 21,582 21,582 — —

Revolver 76,800 76,899 143,822 144,543

Term loan 361,776 362,500 361,086 362,500

Term loan 2 248,872 250,000 248,533 250,000

Mortgages 101,947 103,414 118,121 119,040

Financial liabilities within other liabilities 2 2,780 2,780 2,945 2,945

Exchangeable units of subsidiaries 10,926 10,926 19,045 19,045

Total financial liabilities $ 849,109 $ 852,527 $ 919,657 $ 924,1781 Relates to funds held in escrow included in other assets. 2 Relates to rental security deposits included in other liabilities.





The fair value hierarchy of financial assets and financial liabilities is as follows:

December 31, 2019 Level 1 Level 2 Level 3 Total

Financial assets

Cash $ 2,412 $ — $ — $ 2,412

Accounts receivable — 11,725 — 11,725

Interest rate swaps — 1,761 — 1,761

TIF notes receivable — — 2,703 2,703

Financial assets within other assets 1 165 — — 165



Accounts payable and accrued liabilities $ — $ 21,397 $ — $ 21,397

Distributions payable — 3,029 — 3,029


Revolver — 76,899 — 76,899

Term loan — 362,500 — 362,500

Term loan 2 — 250,000 — 250,000

Mortgages — 102,818 — 102,818

Financial liabilities within other liabilities 2 2,780 — — 2,780

Exchangeable units of subsidiaries 10,926 — — 10,926

Total financial liabilities $ 13,706 $ 838,225 $ — $ 851,931

December 31, 2018 Level 1 Level 2 Level 3 Total

Financial assets

Cash $ 1,110 $ — $ — $ 1,110

Accounts receivable — 11,985 — 11,985


TIF notes receivable — — 3,038 3,038

Financial assets within other assets 1 144 — — 144

Notes and other receivable — 11,593 — 11,593



Accounts payable and accrued liabilities — 22,948 — 22,948

Distributions payable — 3,157 — 3,157

Revolver — 144,543 — 144,543

Term loan — 362,500 — 362,500

Term loan 2 — 250,000 — 250,000

Mortgages — 119,040 — 119,040

Financial liabilities within other liabilities 2 2,945 — — 2,945

Exchangeable units of subsidiaries 19,045 — — 19,045

Total financial liabilities $ 21,990 $ 902,188 $ — $ 924,1781 Relates to funds held in escrow included in other assets. 2 Relates to rental security deposits included in other liabilities.





20. CAPITAL MANAGEMENT

The REIT's capital management objectives are to:

i. ensure compliance with the REIT's Declaration of Trust;

ii. ensure compliance with restrictions in debt agreements; and

iii. provide sufficient liquidity to operate the REIT's properties, fund obligations as they become due and build unitholder value.

Procedures to monitor compliance with the Declaration of Trust and debt agreements are performed as a part of the overall management ofoperations and periodically by review of the REIT's board of trustees and reporting to the REIT's lender. In order to maintain or adjust thecapital structure, the REIT may issue trust units, debentures or mortgage debt, adjust the amount of distributions paid to unitholders, returncapital to unitholders, or reduce or increase debt.

The REIT considers its debt and equity instruments to be its capital as follows:


Debt $ 789,395 $ 871,562


Unitholders’ equity 403,427 437,803

Total $ 1,203,748 $ 1,328,410

The Declaration of Trust provides that the REIT is not permitted to exceed financial leverage in excess of 65% of gross book value, as definedby the Declaration of Trust, and is calculated as follows:


Gross book value $ 1,315,080 $ 1,416,334

Debt 789,395 871,562

Leverage ratio 60.0% 61.5%

Additional investment and operating guidelines are provided for by the Declaration of Trust. The REIT is in compliance with these guidelines.

The REIT's revolver, term loan and term loan 2 are subject to financial and other covenants. The following are the primary financial covenants,with all terms defined by the respective lending agreement:

Threshold December 31, 2019 December 31, 2018

Maximum leverage ratio: Consolidated Total Indebtedness shall not exceed65% of Gross Asset Value < 65% 58.8% 59.6%

Minimum fixed charge coverage ratio: adjusted EBITDA to consolidatedfixed charges shall not be less than 1.50x 1 > 1.50x 2.25x 2.40x

1 Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortization, as defined by the Amended and Restated Credit Agreement for the revolver and termloan, and the Credit Agreement for term loan 2.





21. RISK MANAGEMENT

The REIT’s risk management policies are established to identify, analyze and manage the risks faced by the REIT and to implement appropriateprocedures to monitor risks and adherence to established controls. Risk management policies and systems are reviewed periodically inresponse to the REIT’s activities and to ensure applicability.

In the normal course of business, the main risks arising from the REIT’s use of financial instruments include credit risk, liquidity risk and marketrisk. These risks, and the actions taken to manage them, include:

i. Credit risk

Credit risk is the risk of financial loss to the REIT associated with the failure of a tenant or other party to meet its contractual obligationsrelated to lease agreements, including future lease payments and loan arrangements and TIF receivables. The risk is mitigated by carryingout appropriate credit checks and related due diligence on the significant tenants.

As of December 31, 2019, one individual tenant accounted for 8.3% (December 31, 2018 – 7.7%) of the REIT’s base rent.

ii. Liquidity risk

Liquidity risk is the risk that the REIT will not be able to meet its financial obligations as they fall due. The REIT’s approach to managingliquidity is to ensure sufficient financial resources are available to meet its liabilities as they become due. This includes monitoring of cash,current receivables, current payables, and non-current liabilities as they become current.

Real property investments tend to be relatively illiquid, with the degree of liquidity generally fluctuating in relation to the demand for and theperceived desirability of such investments. Such illiquidity can limit the REIT’s ability to vary its portfolio promptly in response to changingeconomic or investment conditions. If the REIT were required to liquidate a real property investment promptly, the proceeds to the REIT mightbe significantly less than the aggregate carrying value of such property.

The REIT's contractual commitments as at December 31, 2019 are as follows:

Totalcontractual

cash flowIn one year

or less

In more thanone year but

not more thanthree years

In more thanthree years butnot more than

five yearsIn more than

five years

Accounts payable and accrued liabilities $ 21,397 $ 21,397 $ — $ — $ —

Revolver 1 76,899 76,899 — — —

Revolver interest payable 1 2 554 554 — — —

Term loan 1 362,500 — 362,500 — —

Term loan interest payable 1 15,010 13,039 — 1,971 — —

Term loan 2 3 250,000 — — 250,000 —

Term loan 2 interest payable 3 27,520 8,992 17,539 989 —

Mortgages 4 108,659 3,655 22,768 7,735 74,501

Mortgage interest payable 4 19,751 4,509 7,369 6,379 1,494

Letters of credit 393 393 — — —

Interest rate swap, net of cash outflows 19,822 3,102 9,896 5,594 1,230

Exchangeable units of subsidiaries 10,926 — — — 10,926

Total $ 913,431 $ 132,540 $ 422,043 $ 270,697 $ 88,1511 Revolver and term loan interest payable is calculated on $76.9 million and $362.5 million (balance outstanding) using an estimated "all in" interest rate of 3.68% and 3.59% respectivelyunder the "less than one year" column. The long-term average interest rate is based on the 30-day LIBOR forward curve plus the specified margin for the LIBOR rate option underthe term loan resulting in an anticipated decrease to the "all-in" interest rate to 3.48%. The total revolver and term loan interest payable is calculated until maturity of the initialterm.2 Includes stand-by fee on the revolver to be paid in an amount equal to 0.25% of the unused portion of the revolver where the unused portion is greater than or equal to 50% ofthe maximum amount available and 0.15% of the unused portion of the revolver where the unused portion is less than 50% of the maximum amount available, calculated daily.3 Term loan 2 interest payable is calculated on $250.0 million (balance outstanding) using an estimated "all in" interest rate of 3.59% under the "less than one year" column. Thelong-term average interest rate is based on the 30-day LIBOR curve plus the specified margin for the LIBOR rate option under the term loan 2 and results in an anticipated decreaseto the "all-in" interest rate to 3.51%. The total term loan 2 interest payable is calculated until maturity.4 Includes the REIT's share of its equity investment.





The REIT's contractual commitments as at December 31, 2018 are as follows:

Totalcontractual

cash flowIn one year

or less

In more thanone year but

not more thanthree years

In more thanthree years butnot more than

five yearsIn more than

five years

Accounts payable and accrued liabilities $ 22,948 $ 22,948 $ — $ — $ —

Revolver 1 144,543 — 144,543 — —

Revolver interest payable 1 2 8,349 7,251 1,098 — —

Term loan 1 362,500 — 362,500 — —

Term loan interest payable 1 35,674 16,817 18,857 — —

Term loan 2 3 250,000 — — 250,000 —

Term loan 2 interest payable 3 46,681 11,598 22,475 12,608 —

Mortgages 119,040 3,045 16,328 6,224 93,443

Mortgage interest payable 27,742 4,968 9,308 7,898 5,568

Letters of credit 393 — 393 — —

Interest rate swap, net of cash outflows 3,152 — — 2,354 798

Exchangeable units of subsidiaries 19,045 — — — 19,045

Committed property acquisitions 7,299 7,299 — — —

Total $ 1,047,366 $ 73,926 $ 575,502 $ 279,084 $ 118,8541 Revolver and term loan interest payable was calculated on $144.5 million and $362.5 million (balance outstanding) using an estimated "all in" interest rate of 4.64% under the "lessthan one year" column. The long-term average interest rate was based on the 30-day LIBOR forward curve plus the specified margin for the LIBOR rate option under the revolverand term loan resulting in an anticipated decrease to the "all-in" interest rate to 4.49%. The total revolver and term loan interest payable was calculated until maturity of the initialterm.2 Includes stand-by fee on the revolver to be paid in an amount equal to 0.25% of the unused portion of the revolver where the unused portion is greater than or equal to 50% ofthe maximum amount available and 0.15% of the unused portion of the revolver where the unused portion is less than 50% of the maximum amount available, calculated daily.3 Term loan 2 interest payable is calculated on $250.0 million (balance outstanding) using an estimated "all in" interest rate of 4.64% under the "less than one year" column. Thelong-term average interest rate is based on the 30-day LIBOR curve plus the specified margin for the LIBOR rate option under the term loan 2 and results in an anticipated decreaseto the "all-in" interest rate to 4.51%. The total term loan 2 interest payable is calculated until maturity.

iii. Interest rate risk

Interest rate risk arises from the possibility that the value of, or cash flows related to, a financial instrument will vary as a result of changes inmarket interest rates. The REIT manages its financial instruments with the objective of mitigating any potential interest rate risks. For therevolver, term loan and term loan 2 interest rate on the loans will vary depending on changes in base rate and/or U.S. LIBOR rate. The REITis subject to interest rate risks mainly from non-current debt that has variable interest rate. The REIT manages these cash flow interest raterisks using pay-fixed received-float interest rate swap contracts to swap the floating-rate payments on the credit facility for fixed rate payments.

Assuming all fixed-rate debt remain outstanding, there is no impact to the annual interest expense.

Interest rate benchmark reform

The REIT is exposed to the U.S. LIBOR interest rate benchmarks within its hedge accounting relationships, which is subject to the interestrate benchmark reform. The REIT has closely monitored the market and the output from the various industry working groups managing thetransition to new benchmark interest rates. This includes announcements made by LIBOR regulators (including the Financial Conduct Authority("FCA") and the US Commodity Futures Trading Commission) regarding the transition away from USD LIBOR to the the Secured OvernightFinancing Rate ("SOFR"). The FCA has made clear that, at the end of 2021, it will no longer seek to persuade, or compel, banks to submit toLIBOR.

In response to the announcements, the REIT is in the process of developing a transition program. The aim of the program is to understandwhere LIBOR exposures are within the business and prepare and deliver on an action plan to enable a smooth transition to an alternativebenchmark rate. The REIT aims to have its transition and fall back plans in place by the end of 2020.

None of the REIT's current U.S. LIBOR linked contracts include adequate and robust fall back provisions for a cessation of the referencedbenchmark interest rate. For the REIT's interest rate swap contracts, the International Swaps and Derivatives Association’s ("ISDA") fall backclauses were made available at the end of 2019 and the REIT will begin discussion with its banks with the aim to implement this languageinto its ISDA agreements in early 2020.





For the REIT's floating rate debt, the REIT has started discussions with its lenders to amend U.S. LIBOR bank loans so that the referencebenchmark interest rate will change to SOFR. The REIT aims to finalize this amendment in the second half of 2020.

Below are details of the interest rate hedging instruments and hedged items in scope of the IFRS 9 amendments due to the interest ratebenchmark reform.

Instrument type Maturity DateNotionalamount Hedged item

Pay-fixed, receive 1-month U.S. LIBOR interest rate swapcontracts February 26, 2021 $ 300,000 U.S. LIBOR floating rate issued debt

Pay-fixed, receive 1-month U.S. LIBOR interest rate swapcontract September 22, 2022 100,000 U.S. LIBOR floating rate issued debt

Pay-fixed, receive 1-month U.S. LIBOR interest rate swapcontract August 22, 2023 175,000 U.S. LIBOR floating rate issued debt

Pay-fixed, receive 1-month U.S. LIBOR interest rate swapcontract August 22, 2025 175,000 U.S. LIBOR floating rate issued debt

The REIT will continue to apply the amendments to IFRS 9 until the uncertainty arising from the interest rate benchmark reforms with respectto the timing and the amount of the underlying cash flows that the REIT is exposed ends. The REIT has assumed that this uncertainty willnot end until the REIT's contracts that reference U.S. LIBOR are amended to specify the date on which the interest rate benchmark will bereplaced, the cash flows of the alternative benchmark rate and the relevant spread adjustment. This will in part, be dependent on the introductionof fall back clauses which have yet to be added to the REIT's contracts and the negotiation with lenders.

Cash flow sensitivity analysis

The interest rate profile of variable rate interest bearing debt and associated interest rate sensitivity to changes in interest rates is as follows:


Variable-rate instruments

Revolver $ 76,899 $ 144,543

Term loan 362,500 362,500

Term loan 2 250,000 250,000

Effect of interest rate swaps (750,000) (750,000)

Total effective floating rate debt $ (60,601) $ 7,043Effective fixed rate debt as a total of all debt 107.6% 99.2%Annual impact of a 25 bps change on interest rates $ — $ 18

iv. Unit price risk

The REIT is exposed to unit price risk in net income as a result of its exchangeable units of subsidiaries. Exchangeable units of subsidiarieshave been classified as liabilities and measured at fair value based on market trading prices. Exchangeable units of subsidiaries negativelyimpact net income when the unit price rises and positively impact net income when unit prices decline. An increase of $1.00 in the underlyingprice of exchangeable units of subsidiaries results in an increase to liabilities and a decrease in net income of $1.1 million.

v. Currency risk

Currency risk is associated with a fluctuation in the value of the U.S. dollar relative to other foreign currencies. Although not material, the REITis exposed to currency risk as certain of the REIT’s expenses are denominated in Canadian dollars.





22. RELATED PARTIES

Pursuant to the terms of a management agreement dated April 15, 2014, the Manager provides all management services to the REIT. TheManager agreed to provide certain services in connection with the business of the REIT, including: the structuring of the REIT, liaising withlegal and tax counsel; identifying properties for acquisition; maintaining ongoing relationships with the lenders in respect of the mortgageloans for the properties; conducting continuous analysis of market conditions; and advising with respect to the disposition of the properties.In return for its service, the Manager receives the following fees:

i an asset management fee equal to 0.4% of the total assets of the REIT;

ii an acquisition fee in an amount equal to 0.75% of the gross purchase price of each property (or interest in a property), including theprice, due diligence costs, closing costs, legal fees, and additional capital costs for all properties indirectly acquired by the REIT; and

iii an annual incentive fee, calculated in arrears, in an aggregate amount equal to 15% of the REIT's funds from operation per class U unitas derived from the annual financial statements of the REIT in excess of $1.32, subject to ordinary course adjustments for certaintransactions affecting the class U units and increasing annually by 50% of the increase in the U.S. consumer price index.

These transactions are in the normal course of operations and are measured at the exchange amount which is the consideration establishedand agreed to by the parties.

Fees to the Manager are as follows:


Asset management $ 5,516 $ 5,925

Acquisition — 158

Total $ 5,516 $ 6,083

Trustee fees

The REIT's key personnel include trustees and officers of the REIT. For the year ended December 31, 2019 Trustee fees amounted to $0.4million (year ended December 31, 2018 – $0.4 million).





23. SEGMENTS

The REIT has only one business segment. The REIT owns and operates properties in the U.S. The REIT identifies each property as an individualsegment and has aggregated them into a single segment based on similarity in the nature of the tenants and operational processes.

24. SUPPLEMENTAL CASH FLOW INFORMATION

Changes in liabilities arising from financing activities are as follows:

Revolver 1 Term Loan 1 Term Loan 2 Mortgages

Exchangeableunits of

subsidiaries Total

Balance, December 31, 2018 $ 143,822 $ 361,086 $ 248,533 $ 118,121 $ 19,045

Cash flows

Advances 81,516 — — — — 81,516

Debt repayments (149,160) — — (16,221) — (165,381)

Non-cash changes

Amortization of MTM adjustmentsand costs 622 690 339 47 — 1,698

Exchanges — — — — (10,839) (10,839)

Change in fair value — — — — 2,720 2,720

Balance, December 31, 2019 $ 76,800 $ 361,776 $ 248,872 $ 101,947 $ 10,926

Revolver 1Term

Loan 1Term

Loan 2 Mortgages

TIFnotes

payable REIT units

Exchangeableunits of

subsidiaries Total

Balance, December 31, 2017 $ 158,991 $ 360,313 $ 248,214 $ 112,396 $ 3,132 $ 457,590 $ 24,075

Cash flows

Advances 38,100 — — — — — — 38,100

Debt repayments (53,879) — — (2,565) (2,875) — — (59,319)

Repurchases — — — — — (4,764) — (4,764)

Non-cash changes

Assumption — — — 8,194 — — — 8,194

Amortization of MTM adjustmentsand costs 610 773 319 96 41 — — 1,839

Issuances — — — — — 1,147 — 1,147

Exchanges 2 — — — — — 862 (1,072) (210)

Change in fair value — — — — — (19,567) (3,958) (23,525)

Other 3 — — — — (298) (435,268) — (435,566)

Balance, December 31, 2018 $ 143,822 $361,086 $248,533 $ 118,121 $ — $ — $ 19,0451 Changes in financial instruments that hedge the REIT's liabilities arising from financing activities include the REIT's interest rate swaps. Refer to note 7 Interest rate swaps formore detail.2 Represents exchanges of exchangeable units of subsidiaries into class U units.3 Effective May 11, 2018, the class A, class I and class U units of the REIT have been presented within unitholders' equity. Refer to note 11 REIT units and exchangeable units ofsubsidiaries for further detail.





25. SUBSEQUENT EVENTS

i. On January 9, 2020, the REIT entered into a commitment for an $83.3 million 10 year mortgage, bearing interest of 3.48%, subject tocustomary closing conditions.

ii. On January 15, 2020 and February 17, 2020, the REIT declared monthly distributions of $0.072 per class U unit. Holders of class A units,class I units and units of subsidiaries of the REIT were also entitled to receive an equivalent distribution.

iii. On January 17, 2020, the REIT completed the disposition of Douglas Commons, located in Douglasville, Georgia. The property was soldfor $14.1 million.

iv. On January 21, 2020, the REIT terminated $150.0 million of its $300.0 million interest rate swap, with an effective date of November 2,2016. The realized gain as a result of the termination was blended into the pay-fixed rate of the REIT’s $100.0 million interest rate swap,with an effective date of September 1, 2017, which was reduced to 1.41% and resulted in an increase to the weighted average pay-fixedrate of the REIT's swap portfolio to 2.205%.

v. On January 24, 2020, the REIT completed the disposition of Meres Town Center, located in Tarpon Springs, Florida. The property wassold for $7.0 million.

vi. On January 31, 2020, the REIT completed the disposition of Mitchellville Plaza, located in Mitchellville, Maryland. The property was soldfor $35.0 million.

vii. On February 21, 2020, the REIT refinanced its existing revolving credit facility and term loan for four- and five-year terms, respectively,for an aggregate of $525.0 million and reduced pricing for its $250 million term loan. The revolver, term loan and term loan 2 bears interestat U.S. LIBOR plus an applicable margin.

Slate Retail REIT 121 King Street W, Suite 200Toronto, ON M5H 3T9 slateam.com

Slate Retail REIT CONSOLIDATED FINANCIAL STATEMENTS · Slate Retail REIT (the "REIT") is an unincorporated, open-ended mutual fund trust under and governed by the laws of the Province

Documents